White House - Debt prioritization would trigger legal battles

WASHINGTON (Reuters) - The Obama administration warned on Friday that if Congress doesn't raise a cap on government borrowing, efforts to forestall a debt default could trigger huge legal battles that would still damage America's creditworthiness.

Many analysts presume the administration would at least try to prioritize payments to creditors if government coffers run so low later this month that the Treasury is unable to cover all its obligations. Missing non-debt obligations could cause a recession, while missing debt payments is seen as a possible path into an even more damaging financial crisis.